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BUNDS: /SWAPS: Long End ASW Outperforms For Second Day

BUNDS
BundesbankCentral Bank NewsCEEMEAEurozoneGermanyBulletMarketsFixed Income Bullets

A second day of outperformance for long end German ASWs.

  • Several factors help explain the move seen over the last 24 hours, in our view:
  • Spill over from U.S. spread widening (although regulatory change, the driver of the U.S. move, doesn’t seem to be forthcoming in the EU).
  • Market positioning for a delay of German 30-Year issuance after tariff-related uncertainty seemed to de-rail the syndication from being launched last week. Note that the presence of the impending German election is leading to some suggesting that the syndication may not come until after the quarterly futures roll is complete (first notice is March 6).
  • Concentrated short positioning in German long end swap spreads.
  • Looking ahead, fundamentals still seem to signal further downward pressure for long end ASWs, although we did previously warn that already heavy short positioning would likely exacerbate any widening episodes, if a catalyst became apparent.
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A second day of outperformance for long end German ASWs.

  • Several factors help explain the move seen over the last 24 hours, in our view:
  • Spill over from U.S. spread widening (although regulatory change, the driver of the U.S. move, doesn’t seem to be forthcoming in the EU).
  • Market positioning for a delay of German 30-Year issuance after tariff-related uncertainty seemed to de-rail the syndication from being launched last week. Note that the presence of the impending German election is leading to some suggesting that the syndication may not come until after the quarterly futures roll is complete (first notice is March 6).
  • Concentrated short positioning in German long end swap spreads.
  • Looking ahead, fundamentals still seem to signal further downward pressure for long end ASWs, although we did previously warn that already heavy short positioning would likely exacerbate any widening episodes, if a catalyst became apparent.